What 'Gang of Six' plan would do

The Senate's "Gang of Six" includes (clockwise left to right): Democrats Kent Conrad, Dick Durbin and Mark Warner; and Republicans Mike Crapo, Tom Coburn and Saxby Chambliss.

NEW YORK (CNNMoney) -- It's hardly a done deal. And there's absolutely no guarantee the no-taxes-ever conservatives in the House will go for it.

But a debt-reduction framework put forward on Tuesday by the bipartisan Gang of Six in the Senate injected new hope that the ongoing stalemate in the debt ceiling negotiations might be broken.

Before reviewing the specifics of the plan, President Obama gave it an early nod of approval.

"The framework is broadly consistent with what we've been working on here in the White House and with the presentations that I've made to the leadership when they've come over here," he told reporters.

The Gang of Six plan got a positive reception from a bipartisan group of more than 40 senators earlier on Tuesday.

"This is the moment because everybody sees the process drifting towards a kick-the-can down the road response, which is embarrassing," Sen. Joe Lieberman, an independent, told CNN's Ted Barrett.

Deficit hawks were cautiously optimistic.

U.S. credit: Raising debt ceiling is not enough

"If enough lawmakers are willing to step up to the plate along with the Gang, it would renew our chances of getting a 'grand bargain' sufficient to reassure markets ... and to reassure the public that Washington is still fit to govern," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

The two co-chairmen of Obama's debt commission -- Erskine Bowles and Alan Simpson -- concurred. "Pray for the Gang of Six," they said in a statement.

The Gang's framework -- in the making for seven months and modeled on the Bowles-Simpson plan --calls for a two-step legislative process that would first reduce deficits by $500 billion and then implement a larger comprehensive debt-reduction plan.

According to an outline from Senate sources, the framework would:

Shave roughly $4 trillion off debt load: Broadly, the framework would reduce annual deficits over the next 10 years by $3.7 trillion (or $4.7 trillion depending what it's measured against). By 2021, the country's publicly held debt would fall to roughly 70% of GDP, which is the level it's approaching this year.

Reform the tax code: The plan would eliminate some tax breaks, reform others, halve the number of income tax brackets to three from six, and reduce rates.

The rate on the new brackets would fall between 8% and 12% for those in the lowest bracket; 14% and 22% for those in the middle bracket; and 23% and 29% for those in the top bracket. Rates today run from 10% on the low end to 35% on the high end.

The framework also calls for the repeal of the Alternative Minimum Tax -- often called the "wealth" tax, which threatens to hit the middle class in increasing numbers every year because of how it's set up.

The Gang of Six asserts that its tax reform plan overall would result in net tax relief of $1.5 trillion over 10 years, although there is no third-party analysis available to verify that.

And any tax reform effort must be geared to spur economic growth.

Cut spending: In the near-term, the Gang of Six framework would reduce $500 billion in debt over 10 years. While the plan is silent on the issue of raising the debt ceiling, that down payment presumably could be paired with an increase in the debt ceiling, which must be raised within two weeks.

Down payment measures include imposing statutory discretionary spending caps through 2015, selling unused federal property and changing how cost-of-living adjustments to government payments and tax brackets are calculated. There would be some exceptions, such as postponing the formula change for Supplemental Security Income for five years and then phasing it in over the next five years. SSI goes to seniors and disabled people with very low incomes.

The Gang of Six also would freeze congressional pay and repeal the CLASS Act, which is part of the 2010 health reform law. It was designed for seniors who need help with daily tasks such as bathing and dressing. The program was estimated to add to deficits in its second decade and beyond.

Beyond the down payment, the proposal calls for specific savings to be achieved in both discretionary and mandatory programs -- such as $80 billion in armed services and $11 billion from the Commerce Department.

Reform the budget process: The plan includes a host of changes to budget procedures and rules designed to hold lawmakers' feet to the fire in terms of meeting debt reduction goals.

Reform Social Security if debt reduction passes: The framework calls on lawmakers to consider reforming Social Security if a comprehensive debt reduction plan garners 60 votes in the Senate. It also calls on lawmakers to direct any savings derived from reform back into the solvency of the program, not deficit reduction.

CNN's Ted Barrett contributed to this report.